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September 16, 2009

Adobe + Omniture = …what?

By now, almost 12 hours after the announcement, you’ll have heard the news that Adobe is to buy Omniture for $1.8bn. If you haven’t heard, then, I mean, duh. It’s all over Twitter, dude:

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(As an aside, the guys at Omniture should be proud of themselves that they managed to beat out Joe Wilson as a trending topic for a little while, even as the latter was busy facing down Congress).

I don’t think I’m putting myself in the minority when I say that I was totally blind-sided by this announcement. And while I’ve had time to think about it since my first reaction, I’m still a bit mystified by this acquisition.

The official line from the press release is that Omniture’s products will help Adobe’s customers optimize, track and monetize their websites & apps. Unofficially, the rationale for the deal seems to be that Adobe needs Omniture’s revenue to supplement its declining income from its range of software. I can see the logic of the official rationale, but I have serious reservations about Adobe’s ability to extract value from this deal, for the following reasons:

No pedigree in services: Adobe is primarily a software company; whilst it offers a full range of support services around its products, it doesn’t really have experience in providing the very deep, consultancy-like services that Omniture provides. This means that it’ll likely be challenging to attach Omniture offerings to Adobe’s customers; the opposite may be more likely to be true, but does Omniture bring enough customers to make this worthwhile?

No online scale: I’ve said before that one of Omniture’s key challenges as it strives for profitability is to scale out its infrastructure on a cost-effective basis.Adobe does offer a range of online services, but not on any kind of scale that could enable it to really drive cost out of the provision of Omniture’s services. So it’s unlikely that Omniture’s bottom line will improve in the wake of this deal.

Channel/partner conflict: The presence of the Omniture toolset in Adobe’s product lineup will complicate Adobe’s efforts to work with other agencies, EMM and web analytics tool providers, who in turn may find themselves more reluctant to encourage their clients to embrace Adobe technology for fear that it may lead to Omniture making calls on them.

Overall, I just find myself wondering whether Adobe really needed to do this deal in order to be able to leverage Omniture’s capabilities. Adobe has to be looking at some kind of synergy effect to extract value from the deal, because Omniture’s financials aren’t strong enough on their own to move the needle on Adobe’s bottom line. Would a strategic partnership not have been a simpler (and undoubtedly cheaper) option? One possible answer that presents itself is that Adobe had its hand forced by an imminent sale of Omniture to another party. What do you think?

 

Disclaimer
This is one of those posts where I perhaps need to remind you that this is a personal blog which does not reflect the opinions of my employer, Microsoft. Furthermore, you shouldn’t infer that anything I’ve written above implies any foreknowledge or special knowledge of this deal, especially in the context of Microsoft. That is all.

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